Natural-gas price probe called 'laughable'

HOUSTON — The Commodity Futures Trading Commission said Monday that an investigation into a frenzied increase in natural gas prices in late 2003 found that the run-up was the result of cold weather and speculation about gas-storage levels, dismissing criticism that the price rise was caused by improper manipulation by large financial investors.

The results of the investigation, which began in early December and took place over the next nine months, were greeted with skepticism by industrial users of natural gas, who have suffered from a sharp increase in prices in the last two years. Natural gas prices have more than doubled since early 2002, to more than $5 per million British thermal units from about $2 per million BTUs.

"The whole investigation thing is laughable," said Peter R. Huntsman, chief executive of the Salt Lake-based Huntsman companies, a large buyer of natural gas, which it uses to make chemical products. "The way the system is set up, big hedge funds benefit from price volatility while manufacturers are getting slammed."

Huntsman is an outspoken critic of relatively lax limits on natural gas trading, which sometimes allow wide price swings.

The outcry over climbing natural gas prices has been somewhat muted in recent months as concern grew over the price of crude oil, which also shot up before falling back some over the past week. Still, worries persist over historically high natural gas prices as temperatures start to decline in much of the country heading into fall and winter; more gas is needed to heat homes and businesses during colder weather.

The CFTC, which was created in the 1970s to regulate the trading of commodity futures contracts, said in a statement that reactions to colder-than-expected weather in the Northeast in the first week of December 2003 contributed to much of the surge in prices at about that time. Natural gas prices increased more than 50 percent over two weeks in December, stunning many corporate buyers.

It is no secret that large financial firms and hedge funds, which regularly place large bets on the direction of natural gas prices, thrive on volatility in the markets. Gregory Mocek, director of enforcement at the CFTC, said the commission interviewed 36 people from 20 companies involved in natural gas trading but declined to identify any of them.